SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HARBOR BANKSHARES CORPORATION
(Name of Registrant as Specified in Its Charter)
Teodoro J. Hernandez, Vice President and Treasurer
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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HARBOR BANKSHARES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Harbor Bankshares Corporation (the "Company")
hereby appoints Joseph Haskins, Jr. and George F. Vaeth, Jr., or either of them,
the lawful attorneys and proxies of the undersigned with full power of
substitution to vote, as designated below, all shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders called to convene on April 23, 1997, and at any and all
adjournments or postponements thereof:
(1) Election of Directors for three-year terms.
[ ] For all nominees listed below (except as marked to
the contrary below).
[ ] Withhold authority to vote for all nominees listed below.
Three year term: Nathaniel Higgs, Delores G. Kelley,
Erich March and Stanley W. Tucker. (To withhold authority
to vote for any individual nominee, strike out the
nominee's name.)
(2) In their discretion on such other matters as may properly come
before the meeting.
(Continued and to be signed on other side)
<PAGE>
Shares represented by all properly executed proxies will be voted in accordance
with instructions appearing on the proxy. In the absence of specific
instructions, proxies will be voted for the directors named in the proxy
statement and in the best discretion of the proxy holders as to any other
matters.
Dated ---------------------------, 1997
---------------------------------------
Signature
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Signature
(Please sign as name(s) appears on stock certificate. If joint account, both
owners must sign. Executors, administrators, trustees or persons signing in a
similar capacity should so indicate.)
<PAGE>
HARBOR BANKSHARES CORPORATION
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
Important- Your Proxy is Enclosed
You are urged to sign and return the enclosed proxy promptly. If you attend the
Annual Meeting and decide that you wish to vote in person or for any other
reason desire to revoke your proxy, you can do so at any time prior to its use.
<PAGE>
HARBOR BANKSHARES CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1997
To the Stockholders of Harbor Bankshares Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of
Harbor Bankshares Corporation (the "Company") will be held at The Baltimore
Hilton and Towers Hotel, 20 West Baltimore Street, Baltimore, Maryland 21201, on
Wednesday, April 23, 1997, at 1:00 p.m., for the following purposes:
1. To elect four directors of the Company to serve for three-year
terms, and until their respective successors are elected and have
qualified.
2. To transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on March 3, 1997
are entitled to notice of and to vote at the annual meeting or any adjournments
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Baltimore, Maryland George F. Vaeth, Jr.
March 24, 1997 Corporate Secretary
<PAGE>
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished on or about March 24, 1997 to
stockholders of Harbor Bankshares Corporation (the "Company") in connection with
the solicitation of proxies by the Company's Board of Directors to be used at
the annual meeting (the "Annual Meeting") of stockholders to be held at The
Baltimore Hilton and Towers Hotel, 20 West Baltimore Street, Baltimore, Maryland
21201 on Wednesday, April 23, 1997 at 1:00 p.m. and at any adjournments thereof.
The purposes of the Annual Meeting are set forth in the accompanying notice of
the annual meeting of stockholders.
Proxies and Voting
The accompanying proxy is solicited by the Board of Directors of the
Company. The Board of Directors has selected Joseph Haskins, Jr. and George F.
Vaeth, Jr., or either of them, to act as proxies with full power of
substitution. Any stockholder executing a proxy has the power to revoke the
proxy at any time before it is voted. This right of revocation is not limited or
subject to compliance with any formal procedure. Any stockholder may attend the
meeting and vote in person whether or not he or she has previously given a
proxy.
The cost of solicitation of proxies and preparation of proxy materials will
be borne by the Company. The solicitation of proxies will generally be by mail
and by directors, officers and employees of the Company and its subsidiary, The
Harbor Bank of Maryland (the "Bank"), without additional compensation to them.
In some instances solicitation may be made by telephone or telegraph, the costs
of which will be borne by the Company. The Company may also reimburse brokers,
custodians, nominees and other fiduciaries for reasonable out-of-pocket and
clerical expenses for forwarding proxy materials to their principals.
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1996, is being mailed to the Company's
stockholders concurrently with this proxy statement.
Interested stockholders may obtain without charge, a copy of the Company's
Form 10-KSB, as filed with the Securities and Exchange Commission, upon written
request to Teodoro J. Hernandez, Treasurer, Harbor Bankshares Corporation, 25
West Fayette Street, Baltimore, Maryland 21201.
OUTSTANDING SHARES AND VOTING RIGHTS
Only stockholders of record at the close of business on March 3, 1997 will
be entitled to vote at the Annual Meeting. As of such date, there were
outstanding and entitled to vote 641,732 shares of common stock, par value $.01
per share (the "Common Stock"), of the Company each of which is entitled to one
vote at the Annual Meeting. All share amounts in this proxy statement have been
adjusted to reflect a 1 1/3 % stock dividend on the Common Stock (one share for
every seventy-five shares outstanding or reserved for issuance) effected
February 28, 1997. Cumulative voting is not permitted for the election of
directors.
<PAGE>
ELECTION OF DIRECTORS
The charter and by-laws of the Company provide that the directors shall be
classified into three classes as equal in number as possible, with each director
serving a three year term. Currently, there are 15 members of the Board of
Directors. The first, second and third classes each consists of six, four and
five directors. The terms of the directors of the second class expire in April,
1997.
Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock present in person or represented by proxy at the meeting
with a quorum present. Abstentions and broker non-votes are not considered to be
votes cast.
Nominees
Unless otherwise indicated in the enclosed proxy, the persons named in such
proxy intend to nominate and vote for the election of the following four
nominees for the office of director of the Company, to serve as directors for
three years or until their respective successors have been duly elected and
qualified. All such nominees are currently serving as directors. The Board of
Directors is not aware that any nominee named herein will be unable or unwilling
to accept nomination or election. Should any nominee for the office of director
become unable to accept nomination or election, the persons named in the proxy
will vote for the election of such other persons, if any, as the Board of
Directors may recommend.
The names and ages of persons nominated by the Board of Directors, their
principal occupations and business experience for the past five years, the
number of shares of Common Stock of the Company beneficially owned by them on
March 3, 1997, and certain other information are set forth below.
Name of Nominee Information Regarding Nominee
Nominees for Directors to be elected at the 1997
Annual Meeting to serve until the 2000 Annual Meeting (Class II)
Nathaniel Higgs Reverend Higgs is 66 years old and
has served as a director of the Company
since its formation in 1992 and of the
Bank since 1981. He is Pastor of Southern
Baptist Church.
4,505 shares (0.70%)(1)(2)(9)
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Delores G. Kelley Dr. Kelley is 60 years old and has served
as a director of the Company since its
formation in 1992 and of the Bank since
1980. She is a Senator in the Maryland
State Senate.
10,536 shares (1.63%)(3)(10)
Erich March Mr. E. March is 45 years old and has
served as a director of the Company
since its formation in 1992 and of the
Bank since 1981. He is Vice President
of March Funeral Homes, Inc.
19,253 shares (2.98%)(1)(4)(10)
Stanley W. Tucker Mr. Tucker is 49 years old and has served
as a director of the Company since 1996
and of the Bank since 1996. He is
Managing General Partner of MMG Ventures
L.P.(an investment management company).
37,492 shares (5.82%)(1)(9)(11)
Continuing Directors
The following information is provided with respect to directors who will
continue to serve as directors of the Company until the expiration of their
terms at the times indicated.
Name of Director Information Regarding Director
Directors to serve until the 1999 Annual Meeting
(Class I)
J. P. Blase Cooke Mr. Cooke is 50 years old and has served
as a director of the Company since its
formation in 1992 and of the Bank since
1985. He is President and Chief Operating
Officer of Thomas Harkins, Inc.
(construction).
5,163 shares (0.80%)(9)
James H. DeGraffenreidt, Jr. Mr. DeGraffenreidt is 43 years old and has
served as a director of the Company
since 1996 and of the Bank since 1996.
He is President and Chief Operating
Officer of Washington Gas Light Company,
distributors of natural gas.
3,875 shares (0.60%)(9)
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Joe Louis Gladney Mr. Gladney is 62 years old and has served
as a director of the Company since its
formation in 1992 and of the Bank since
1982. He is President of Gladney
Transportation & Oil Company (heating
oil sales and bus transportation).
33,618 shares (5.22%)(9)
Louis J. Grasmick Mr. Grasmick is 73 years old and has
served as a director of the Company
since its formation in 1992 and of
the Bank since 1982. He is Chief
Executive Officer of Grasmick Lumber
Company, Inc.
13,103 shares (2.03%)(7)(10)
Sachinder Gupta Mr. Gupta is 52 years old and has served
as a director of the Company since its
formation in 1992 and of the Bank since
1989. He is President of Earth
Engineering Sciences, Inc., an engineering
company.
12,619 shares (1.95%)(1)(10)
Joseph Haskins, Jr. Mr. Haskins is 49 years old and has served
as a director of the Company since its
formation in 1992 and of the Bank since
1980. He has served as President and
Chief Executive Officer of the Company
since its formation in 1992 and of the
Bank since 1986, and Chairman of the
Board of the Company and the Bank since
1995.
44,367 shares (6.73%)(1)(8)(10)
Directors to serve until the 1998 Annual Meeting (Class III)
Stephen A. Geppi Mr. Geppi is 47 years old and has served
as a director of the Company since
1996 and of the Bank since 1996. He
is President and Chief Executive
Officer of Diamond Comic Distributors,
Inc., a distributor of comic books.
8,080 shares (1.26%)(9)
John Paterakis Mr. Paterakis is 68 years old and has
served as a director of the Company
since its formation in 1992 and of the
Bank since 1982. He is President
and Chief Executive Officer of H & S
Bakery, Inc. and Northeast Foods, Inc.
47,625 shares (7.37%)(5)(10)
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<PAGE>
Edward St. John Mr. St. John is 58 years old and has
served as a director of the Company
since its formation in 1992 and of the
Bank since 1990. He is President
and Chief Executive Officer of M.I.E.
Investment Company, a real estate
development company.
8,106 shares (1.26%)(9)
Ronald Scott Mr. Scott is 72 years old and has served
as a director of the Company since
its formation in 1992 and of the Bank
since 1982. He is retired from the
Baltimore Post Office.
2,603 shares (0.40%)(6)(9)
George F. Vaeth, Jr. Mr. Vaeth is 63 years old and has served
as a director of the Company since its
formation in 1992 and of the Bank
since 1981. He has served as
Secretary of the Company since its
formation and of the Bank since 1982. He
is President of George Vaeth Associates,
Inc. (architects).
11,855 shares (1.84%)(1)(10)
Beneficial ownership of
Common Stock of all
executive officers as a
group (18 persons) 266,325 shares (38.07%)(12)
_____________
(1) Member of the Audit Committee of the Bank.
(2) Includes 2,327 shares owned jointly by Reverend Higgs and his wife. Does
not include 13,517 shares owned by a religious organization which
Reverend Higgs has the power to vote.
(3) Includes 611 shares owned by Dr. Kelley and her husband.
(4) Includes 15,242 shares owned by a corporation controlled by Mr. Erich
March.
(5) Includes 32,426 shares owned by three corporations controlled by Mr.
Paterakis, J and B Associates Inc., 16,213 shares, H and S Bakery Inc.,
6080 shares, and Northeast Food Inc., 10,133 shares.
(6) Does not include 16,853 shares owned by a fraternal organization to
which Mr. Scott has the power to vote.
(7) Includes 3,796 shares owned jointly by Mr. Grasmick and his son.
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(8) Includes 459 shares owned jointly with Cleora Haskins and exercisable
options to purchase 13,173 shares.
(9) Includes currently exercisable options to purchase 2,026 shares.
(10) Includes currently exercisable options to purchase 4,053 shares.
(11) Includes 35,466 shares under the name of MMG Ventures L.P.
(12) Includes currently exercisable options to purchase 57,752 shares
held by all executive officers and
directors, as a group.
Board and Committee Meetings
The Board of Directors of the Company has no standing committees. The Board
of Directors of the Company held 12 meetings during 1996. With the exception of
Stephen A. Geppi who attended 44% of the meetings, each director attended at
least 75% of the meetings of the Board of Directors and committees of the
Company.
The Audit Committee of the Bank meets with the Company's independent
accountants to review whether satisfactory accounting procedures are being
followed and whether internal accounting controls are adequate, and to inform
itself with regard to non-audit services performed by the independent
accountants. During 1996, the directors designated in note (1) above were
members of the Audit Committee, which met four times.
Compensation of Directors and Executive Officers
The following table shows compensation paid to the chief executive officer
of the Company for the three years ended December 31, 1994, 1995, and 1996. No
other executive officer received total annual salary and bonus in excess of
$100,000 during such period.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------------------------------
Number
Annual Other of Options All Other
Name and Position Year Salary Bonus(1) Compensation(2) Granted Compensation
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph Haskins, Jr. 1996 $150,000 $45,049 $- 0 $6,357(3)
President and CEO 1995 132,225 32,000 - 4,000 6,636(3)
1994 115,500 63,100 - 1,000 5,662(3)
</TABLE>
_____________
(1) Bonus paid pursuant to terms of Employment Agreement.
(2) Other annual compensation did not exceed 10% of salary and bonus.
(3) Represents $2,000 annual contribution to an individual retirement
account and the Company's matching contribution to the Bank's 401(k)
Profit Sharing Plan.
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The Company has adopted stock option plans, pursuant to which it has
reserved 30,000 shares of its Common Stock for the issuance of options. The
Company granted no options to purchase Common Stock to Mr. Haskins in 1996.
The following table sets forth the aggregated option exercises in 1996 and
the option values at December 31, 1996, based upon a market value for Company
Common Stock of $15.00 per share.
<TABLE>
<CAPTION>
Number of Number of Value of Unexercised
Shares Acquired Value Unexercised Options in-the-Money Options
Name and Position on Exercise Realized at Fiscal at Fiscal Year-End
Year-End(1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph Haskins, Jr. -- $-- 6,080 $51,072
President and CEO 3,040 20,277
3,040 21,280
1,013 5,065
4,053 0
</TABLE>
_____________
(1) Currently exercisable options.
Compensation of Directors
Directors of the Company receive a fee for attending meetings of the Board
of Directors or committees thereof. Directors of the Bank receive a fee of $300
for each board meeting attended ($400 if the director is a member of the Bank's
Executive Committee), but do not receive a fee for attendance at committee
meetings. Total fees paid to directors of the Bank during 1996 were $80,300.
Directors who are not employed by the Company or the Bank are permitted to elect
whether to receive their fees in the form of cash or in the form of options to
purchase Common Stock of the Company under the 1995 Director Stock Option Plan
which has been approved by the Company's stockholders. The exercise prices of
the options will equal the market price of the Common Stock on the date of
grant. In addition, on September 5, 1995, each member of the Board of Directors
who was a member of the Executive Committee received options to purchase 4,053
shares of Common Stock of the Company, and each other director received options
to purchase 2,026 shares of Common Stock of the Company. The option price was
$15.00 per share, and the options will expire on September 5, 2005.
Employment Contracts
The Company entered an Employment Agreement with Joseph Haskins, Jr. (the
"Employment Agreement") which, as amended effective January 1, 1996, provides
that Mr. Haskins will be employed by the Company until the earlier of (a) the
close of business on Mr. Haskins' 65th birthday, (b) the date three years after
either the Company or Mr. Haskins gives written notice of termination, or (c)
the date on which Mr. Haskins' employment is otherwise terminated pursuant to
the provisions of the Employment Agreement. The Employment Agreement provides
that Mr. Haskins will serve as Chairman of the Board, President and Chief
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Executive Officer of the Company at an annual salary of not less than (i)
$150,000 for 1996, (ii) $157,500 for 1997, (iii) $165,375 for 1998, and (iv) any
subsequently established higher annual base salary for subsequent years during
the terms of the Employment Agreement. The Employment Agreement provides for a
bonus for the prior year if the Company's net income for the prior year is
greater than $400,000. The amount of the bonus will be equal to the sum of (i)
2% of the Company's aggregate income before income taxes, plus (ii) the
Company's aggregate depreciation amount, plus (iii) the Company's aggregate
amortization of goodwill amount, plus (iv) the Company's aggregate amortization
of securities purchased at a premium, plus (v) the Company's aggregate interest
amount on Resolution Trust Company debt. The bonus amount may not exceed 100% of
Mr. Haskins' annual combined base salary then in effect. In addition to those
benefit programs, plans, and arrangements of the Company generally available to
its employees, the Employment Agreement provides that Mr. Haskins will receive
medical insurance, long-term disability insurance, life insurance, a
self-directed individual retirement account funded with an annual contribution
of $2,000, and the use of an automobile. If Mr. Haskins' employment is
terminated for reasons other than death, total disability or "cause" as defined
in the Employment Agreement, the Company is required to pay within 60 days after
such termination, a lump sum equal to: (i) six months of his annual combined
base salary at the rate in effect immediately prior to the date of termination;
plus (ii) a bonus that shall be equal to (X) the average bonus percentage of
combined base salary paid to Mr. Haskins during the three years prior to the
year in which the termination occurs, multiplied by (Y) the six months salary
amount described above; plus (iii) six months of medical insurance premiums for
him and his family at the level of coverage existing at the time of termination.
In addition, Mr. Haskins shall be entitled to keep his then-current company
automobile.
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<PAGE>
Transactions with Directors, Executive
Officers, and Affiliates
During the past year the Bank has had loan transactions in the ordinary
course of its banking business with directors and executive officers of the Bank
and with their affiliates. Loans to such persons were made in the ordinary
course of business and did not and do not currently involve more than the normal
risk of collectibility or present other unfavorable features. All such loans
were made on substantially the same terms, including interest rates and
collateral requirements, as those prevailing at the time for comparable
transactions with non-affiliates. The Bank expects to enter into such
transactions in the future. As of December 31, 1996, loans to directors and
executive officers of the Bank, and their affiliates, including loans guaranteed
by such persons and unfunded commitments made in 1996, aggregated $3,705,000 or
approximately 25.5% of tangible stockholders' equity of the Bank.
PRINCIPAL STOCKHOLDERS
No persons were known by the Company to own beneficially, directly or
indirectly, more than 5% of the Company's Common Stock outstanding on March 3,
1997 except as follows:
Name of Stockholder Information Regarding Stockholder
John Paterakis 603 South Bond Street, Baltimore, Maryland
21231, beneficially owns 47,625 shares
(7.37%). This includes currently exercisable
options to purchase 4,053 shares.
Joseph Haskins, Jr. 25 West Fayette Street, Baltimore, Maryland
21201, beneficially owns 44,367 shares (6.73%).
This includes 459 shares jointly owned with
Cleora Haskins and currently exercisable options
to purchase 17,226 shares.
Stanley W. Tucker 217 East Redwood Street, Baltimore, Maryland
21202, 37,492 shares (5.82%). This includes
35,466 shares under the name of MMG
Ventures L.P. and currently exercisable options
to purchase 2,026 shares.
Joe Louis Gladney 2301 Sinclair Lane, Baltimore, Maryland 21213,
beneficially owns 33,618 shares (5.22%). This
includes currently exercisable options to
purchase 2,026 shares.
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<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on the Company's review of the copies of the forms received by
it, or written representations from certain reporting persons that they were not
required to file Form 5, the Company believes that, with regard to the
transactions required to have been reported in 1996 or on a Form 5 for the year
ended December 31, 1996, all of the directors and executive officers of the
Company have made the necessary filings in compliance with Section 16(a) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
INDEPENDENT PUBLIC ACCOUNTANT
Management has selected Ernst & Young LLP as independent public accountants
to audit the Company's 1997 financial statements. That firm also audited the
Company's financial statements for 1996. A representative of Ernst & Young LLP
is expected to be present at the Annual Meeting, with the opportunity to make a
statement if he or she decides, and will respond to appropriate questions.
OTHER MATTERS
The management of the Company knows of no matters to be presented for
action at the meeting other than those mentioned above; however, if any other
matters properly come before the meeting, it is intended that the persons named
in the accompanying proxy will vote on such other matters in accordance with
their judgment of the best interest of the Company. Other than the election of
directors, each matter to be submitted to the stockholders requires the
affirmative vote of a majority of all the shares voted at the meeting or a
majority of all the shares outstanding and entitled to be voted.
STOCKHOLDER PROPOSALS
All stockholder proposals intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company not later than November
14, 1997 for inclusion in the Company's proxy statement and proxy relating to
that meeting.
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